News & Events

Contractor Compensation in Focus

The debate over contractor compensation continues.  The Senate unanimously approved the $631 billion annual defense policy bill on Tuesday (12/4) that includes a proposal from Sen. Joe Manchin (D-W.Va.) to decrease the cap on taxpayer-funded compensation to contractors from $763,000 to $230,700.  Notably, this is only the second unanimous vote in 51 years for the defense bill.  Two quotes in particular summarize the differing opinions regarding contractor compensation caps:

“This proposed limitation would deprive the government of access to critical skills, such as those currently in high demand to defend government networks from cyber intrusions.  Existing limitations on compensation for federal employees are already hindering the government’s ability to recruit and retain highly skilled professionals.  While it may seem that this proposal could address the issue, it fails to recognize that federal contractors have to compete for top talent with companies that operate exclusively in the commercial sector.”  – Stan Soloway, President of the Professional Services Counsel

“At a time when our economy is struggling, millions of Americans are unemployed, and our national debt and deficit continue to grow, taxpayers should not fund exorbitant government reimbursements for exorbitant private contractor salaries.”  – Colleen M. Kelley, President of the National Treasury Employees Union

Contractor compensation is a heavily debated topic that may have broad reaching impact on the ability to execute important Federal initiatives and operate major programs.  Potential responses from contractors may include (i) shifting focus toward more commercial work, (ii) placing less qualified personnel on contracts, (iii) reducing the number of high-level, indirect personnel, or (iv) cutting back on other indirect activities such as business development given the impact on profitability.  Irrespective of their strategies, these compensation caps represent another challenge in an already difficult contracting environment.

Contributors: Marc Marlin and Robert Dowling